Small is a state of mind, not a value judgment

When I left a large law firm to start my firm, Jacobson Attorneys, in 2005 I priced my services relatively low on the naive assumption that I would attract a greater volume of clients who would find my fees affordable. One of the first lessons I learned was that this thinking doesn’t work because, despite best intentions, clients frequently associate low fees with less value regardless of the quality of the services. This is especially the case when it comes to legal services where there is a general assumption that these services are costly.

Value perceptions are informed by a number of factors. One is your price. Other factors include your work space, how you dress, how you present your work, which car you drive and more. I don’t think there is a fixed list of factors which you can tweak to optimise your clients’ value perceptions but there seem to be a common set and if you want to create a perception of value in your services and you don’t, for example, wear a suit or work in a fancy corporate work space, you usually need to be fairly creative about establishing your value.

One business which has a pretty unique approach and is remarkably successful is Missing Link. If you find someone wearing a suit, it may be a client or a fancy dress thing. What is clear is that the Missing Link team does incredible work and their service is far beyond most businesses.

My business, Web•Tech•Law, is a small business. I’ve been thinking about what that means: “small business”. Well, to begin with it is small because my team comprises me, a lawyer and numerically small group of people I collaborate with for different projects. “Small” is a pretty loaded word when it is used to describe a business. Aside from the number of people who form part of that business, the word is sometimes used to describe the business’ clients (are they also “small businesses” or individuals or are they multinational corporations?); the type of work the business does or the business’ geographical or functional footprint.

The word “small” also creates expectations about how much that business will charge for its services and this is where the word “small” becomes deeply problematic from two perspectives. On the one hand, many clients approach a small business with an expectation that the business will charge low fees. If you are selling some sort of commodity, a small price tag is a good thing. It probably enhances the customer’s perception of value in that business.

When it comes to services, especially professional services, a low fee seems to imply poor quality and less value. In many cases this is actually true. When it comes to legal services it is pretty difficult to charge low fees and produce high quality outcomes (not impossible, some lawyers have found the perfect balance) partly because charging low fees means you have to service more clients to earn enough money overall to cover costs and live a decent life and that often means you can’t spend as much time doing great work as you would like to. On the other hand, charging higher fees gives you the productive space to do better quality work without the stress that if you don’t get to the next 20 files that day, you won’t cover your costs for the month. The challenge is that a common expectation is that your fees should be lower because you are a “small business” in one of more respects and, therefore, you shouldn’t need to charge so much.

This perception is based on an assumption, conscious or unconscious, that “small” means “less”. Non-lawyers are usually unable to determine when legal services are high quality services because much of what a lawyer does tends to be unintelligible to non-lawyers so competence is generally assumed. The emphasis shifts to other factors when you assess value in the services you receive. When you walk into a large law firm’s reception area and see the beautiful decor, the modern meeting rooms and well dressed lawyers, you believe that there is more value in the work those lawyers are going to do for you and you expect to pay a lot of money for that work. Similarly, when the large law firm lawyers present you with a substantial bill, you may tend to regard the services as having substantial value even if you’re not sure of the quality. In this sort of environment, charging higher fees serves an important purpose when it comes to value perceptions. Obviously, if you are going to charge high fees you have to deliver too but the high fees are a good starting point.

On a related note, this idea that because a lawyer works in a large firm, that lawyer is a better lawyer than the lawyer in the solo practice on the other side of the metaphorical tracks is a nonsense idea. When it comes down to it, your work is being done by individuals and although large firms tend to hire the top law students, they don’t necessarily always hire top notch lawyers. I have been fortunate to work with or encounter attorneys in small firms who are absolutely superb lawyers (one of those lawyers is a good friend). I frequently encounter lawyers in large firms or in corporate legal departments in huge companies who produce very average work. Again, the size of your office is not a reliable indication of whether you are any good at what you do. You might just be really good at filling a time sheet and meeting high fee budgets.

Frank Moss (LOC)

As tricky as pricing is from a client value perception perspective, it is even more problematic if you consider that where you price your services is also a reflection of the value you place in your own work. This is a tough lesson to learn because learning it requires you to break harmful and, at the same time, self-reinforcing patterns. When you charge fees that are lower than your work is worth (certainly less than your basic effort is worth), you are essentially saying that you don’t believe your services are worth much and you don’t deserve to be paid much for them, if anything at all. So you make less money, have to bring in more business to generate enough fees to cover your costs and the more business you have to generate (which, in itself, is challenging if you don’t believe your work is worth much), the less time you have to do good quality work. That, in turn, reinforces your perception that your work isn’t really worth much and so it goes on.

Breaking that perception requires you to take a hard look at what you do, what it is worth and, more importantly, what you are worth as a service provider (we’re all unique and beautiful but what are you contributing to your clients’ bottom line in monetary terms?). If you believe your services are worth less (or worthless), you can’t expect much more than an unending slog uphill in the rain and in the dark. On the other hand, if you are prepared to suspend disbelief long enough to let a little self-worth in, you may realise that you are actually pretty good at what you do and, given the mental space to do better work, you can become pretty great at your work and solve some pretty important problems your clients are experiencing. That merits not only payment but more money than you may have expected. In the process, you start to understand that you are a beautiful and unique snowflake who is entitled to a good living. That may lead to better quality work, more innovation and happier clients all while still only having a small team, in numerical terms, and modest offices.

Reaching that point is not that easy and it requires sacrifice. Higher fees means you won’t receive work from clients with more modest budgets but that isn’t always a bad thing. My humble experience has shown me that while some small clients are great clients to work with and who recognise the value in the services they receive, even if they just can’t afford higher fees, many more clients take the services for granted and don’t pay on time, a reasonable amount or at all. Those clients are probably better serviced by providers who are optimised for lower fees with acceptable trade-offs when it comes to work quality and service levels.

Being regarded as a “small business” is challenging. Some of this has to do with how your clients (or prospective clients) perceive you and your work but mostly the challenge is how you perceive yourself and your professional worth? When you think about your business as a “small business”, are you forming a value judgment about your business or are you just stating a numerical fact about the size of your otherwise high value team?

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I couldn’t agree more with Mr Jacobson. Sadly, it is a perception that exists and I think, to a large extent, our legal profession is about marketing. Expensive sells. I am a sole prop in a small business and I do hear comments about the bigger firms and how posh they are. The irony is, the very same clients who complain that your fees are excessive will not contest a bill from a larger, more expensive firm of Attorneys.

Very good article – thanks, Paul. Makes you think about terms like “value”, “worth” and “quality” as they relate to the small practitioner. Self-image and a sense of self-worth are things we all have to work at all the time, personally and professionally. But public perceptions are out there and they’re quite hard to change. Perhaps our law societies (who do very little that I can see in terms of assisting, nurturing and promoting the profession, especially the “small guys”) could play a role in shifting attitudes?

Hi Michelle, the more I think about it the more I believe that changing those perceptions begins with us. Our starting point is recognising our value and our entitlement to be paid a reasonable fee for our work and then projecting that into the world.

Often doing that is counter-intuitive because it may involve turning away work we could use because the client isn’t comfortable charging a fee that represents the value we add. It requires that we draw a metaphorical line in the sand and develop the discipline to stick with that.

It may also mean that we have to up our game and do better work to justify the value we add.

Whatever we do, I believe this is a case of us setting the right tone first and looking to external bodies to support us.

I have engaged with “large” audit firms, the “big names”, and what has ended up happening is that I have received bad service from not-yet-competent staff, who were not supervised and their work was not thoroughly reviewed by the CA assigned to my account, the person who I actually engaged with.

I’m starting to believe, the only thing the big firms have is a perceived brand, lacking any real substance to back it up, and that if you’re looking for good authentic service, the best approach is to find a “small” firm that actually cares about their clients and their own reputation.

Nathan, unfortunately most if not all run to big firms and never give the small guy a chance. Even though our work tends to be better. I had a billionaire client who used me to get him off the hook for an arrest but despite fine work still runs to his big five attorney. Go figure!

As a person managing a small team myself(6 in total), I know it’s difficult.

I find compliance cost very high, I currently have a full time resource sorting out accounting related matters and liaising with SARS after a big name accounting firm made a mess of our books.

At the same time, I know that we offer our clients real value, that they would not get from anyone else for the same price, and the only reason it is possible is due to our agility and approach to business.

I don’t have a flashy office and I don’t have major overheads. I used to have ‘official’ offices, but as of April this year moved out and now have a small home office for my team to use occasionally but primarily operate as a remote unit. Productivity has noticeably increased.

One thing that makes a big difference for us, is that our systems/processes govern a lot of what we do, so we’re able to work mostly independently, asynchronously and 98% paper free.

From the perspective of the ‘small business owner’ it is really difficult, to provide client service, oversee staff and grow the business at the same time, but I guess if it was easy everyone would be doing it.

I generally work at least 12 hours a day, but easily pull 15 to 18 hour days in order to keep things going.